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Archive for the ‘Canada’ tag

The Olympian Climate Policy, Do Emitters Believe?

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The climate policy intelligentsia gets all knotted up on key aspects of climate policy design from targets to coverage, to allocation to auction and then recycling. But, I would argue that none of this really matters. Instead, what matters is what emitters believe. And so the most important question in climate policy is not the target, or the instrument or overcompensating through free allocations or technology subsidies but “do emitter believe?”. All else then flows from this and all else becomes secondary.

Getting going with credibility matters, period. And then expectations drive outcomes. Which brings me to this today,

Carbon Falls as Climate Failure Is Oil Polluter Boon

The inability of government leaders to agree on stricter pollution controls at meetings in Copenhagen last month is showing up in commodity markets, where it’s getting cheaper to emit greenhouse gasses.

The price of permits to emit a ton of carbon dioxide sank 10 percent in London, while oil gained 6 percent in New York since Dec. 7, when 8,000 delegates attended a summit in the Danish capital to prepare for a successor to the Kyoto Protocol, the climate treaty that expires in 2012. Not only did the summit fail to increase regulation on polluters, it also reduced incentives to invest in clean energy.
“There are surely two factors impacting carbon prices: the failed summit in Copenhagen and a probable surplus in the EU emissions-trading system,” said Jacek Kaczorowski, chief executive officer of Poland’s Belchatow coal-fired power plant, the biggest polluter in Europe, according to EU data. Any “sustainable recovery” in carbon markets is unlikely this year, he said.

The work a number of folks did for NRTEE on expecations and outcomes is illustrative, so if you are feeling teckey see here

Do Emitters Believe?

Do Emitters Believe?


But this graph says lots. Simply, with low expectations there are low reductions and so one of two things happen: either you don’t hit your targets as the graph from the NRTEE modelling suggests, or carbon prices must climb in the future to knock out all that high emitting capital that is the result of unbelievable policy. But either way, delay is costly, and policy credibility is key.

Written by Dave Sawyer

January 19th, 2010 at 9:21 am

Posted in Emissions Pricing

Tagged with ,

New Federal Targets — Target Trash Talk Redux

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Word on the street is new Federal targets will be announced at Copenhagen. Most likely PM Harper is playing follow the leader, literally following Obama to Copenhagen, So, expect harmonized targets with the US, which is -17% below 2005.

But anything can happen, cause target trash talk is way easier than action.

Written by Dave Sawyer

November 26th, 2009 at 10:33 am

Posted in Emissions Pricing

Tagged with , , ,

The Masks are off….

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See here and here for an elaboration of this,

Ottawa will delay the release of climate regulations until there is a firm agreement on a global approach and clarity on how the United States intends to regulate emissions – which could take until late 2010,

and the Minister’s comments

“In the absence of an international understanding, and in the absence of an international framework, it is difficult for any country to finalize domestic policies and to put in place its domestic approach — whether that’s a regulatory approach or a cap and trade, or something else,”

I guess if Canada developed a Regulatory Framework on Industrial Emissions when the US said it would do nothing and we had clear international commitments under Kyoto, then it would only make sense to abandon the Regulatory Framework in light of US action and a uncertain international agreement.

And they called Prime Minister Martin Mr. Dithers.

Written by Dave Sawyer

November 18th, 2009 at 8:59 am

Be Patient on Climate Policy … Because we have no ambition

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A senior federal cabinet minister has added some long awaited clarity on where Canada is going with climate policy in advance of Copenhagen,

“I don’t think we’ve been ambiguous on this issue…”

(here)

Be patient cause we have no policy....

Be patient cause we have no policy....

This picture, and indeed the whole federal policy, is eerily paralleling the Bush administrations bold forays into climate policy … see post here

Our climate policy is this big...

Our climate policy is this big...

As always, while the feds fiddle, energy intensive industries are rolling out high emitting capital with low expectations that they will see real carbon prices,

I think there is certainly hope in the industry that they can see some clarity in the near future,” Dunbar said.

“They don’t want to see this situation with all this uncertainty drag on for years. I think the sooner they can have clarity, the better off they are and the easier it will be for people to make decisions.”

He said there are many points of view on the subject –some players wouldn’t even mind a carbon tax, for instance –but most agree they want a fair regime that applies equally to all emitters, without picking winners and losers.

Some $100 billion worth of oilsands projects for northern Alberta were deferred or canceled last year as credit markets froze and commodity prices tanked.

The only certainty in Canadian climate policy is inaction.

Written by Dave Sawyer

November 8th, 2009 at 7:46 pm

Linking to a Star is fun, but the ride may be wild…

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Ok, so cap and trade with the US just got really interesting:

Canada to seek climate deal with Obama

Here

There was talk of this post election, including morphing the current intensity based system (in the Regularly Framework) to something with a hard or binding cap before 2015. Linking a national cap and trade program to the US is likely a step in the right direction since with the US involvement, competitiveness issues largely fall away (if we all have the same carbon price there are not cost differentials in product markets). This issue has been a major stumbling block to moving forward and resolving it will help. But, new excuses will likely arise that will lead to more inaction, notably our current economic and financial poverty, and what about China and India? But still, this seems to be a good omen from Canadian Climate Policy.

And most US proposals bring under the cap and trade program emissions from buildings, transportation and other manufacturing, which is something Canadian policy has not done (i.e. the Regulatory Framework covers about 50% of Canada’s emissions).

But I think the more important question is can we assume linking cap and trade systems is always good? I can think of a number of reason why linking initially with the US could be problematic:

Policy sovereignty. For anyone who has reviewed the WCI design document knows, once you sign on, you have to adopt what others have developed. And in the case of say Manitoba with 3 MT of reductions and California with 300 MT, whose interests do you think matter? This has been the case with WCI and it could be the case with Canada and the US.

Governance. With the provinces forging ahead, this sudden resurgence from the feds can’t make the Canadian WCI partners too happy. And with multiple trading systems emerging, it could be a real nightmare for large emitters.

More distributive impacts. While economic theory says linking is good since it lowers overall compliance costs, the incidence of trading is not uniform between buyers and sellers. Simply, linking permit trade to a larger market will change domestic permit prices, and if you are a buyer or seller, this matters. So, some may be better off and some worse.

Volatility. A larger market with voracious (and ahem, unregulated) traders will drive price volatility, which results in uncertain permit prices and inefficient outcomes. Something industry hates.

So, linking can be good but it can be bad, so one needs to proceed with caution. In other words, when you hitch yourself to star, be prepared for a wild ride.

Written by Dave Sawyer

November 5th, 2008 at 10:24 pm

Dry mushrooms could slow climate change…and some are needed for climate policy

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Apparently some shrooms can sequester more carbon as temperatures rise…

Because the fungi in the dry northern areas are off their feed, they process less of the greenhouse gas carbon dioxide, leaving more of it locked in the soil and less of it in the atmosphere, (here)

Well if only we could get some of these little babies to help with climate policy … we might just get a coherent policy vision. Says our intrepid BC harvester Bad Weed (see here for his last quote):

Dude, I have had a long-term climate policy vision, and it rocks.

Indeed.

Written by Dave Sawyer

November 4th, 2008 at 3:17 am

Posted in Aside

Tagged with , ,

Sometimes when You Cry Wolf you get eaten…..

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The Economist has an article on why Prime Minister Harper deserves a second mandate, but not a majority (here). Two ideas support this:

One a majority is not warranted for his stand on climate policy:

Simply to rubbish this [Dion’s carbon tax] as a “crazy” idea that would “screw everybody”, as Mr. Harper has done, shows a disappointing lack of leadership, and is grounds enough to deny the Conservatives a majority.

Two, the Prime Minister should not lose the election over his measured response to a possible recession that is most likely a non-event:

But it is his seeming non-reaction to what is so far a non-crisis that looks likely to deny him the majority he was seeking, and could even let in the opposition. In what is the first credit-crunch election in a big Western country, Mr. Harper’s ejection would set a dispiriting precedent that panic plays better politically than prudence.

Well, spreading economic panic cuts both ways, and selling the carbon tax as a recession waiting to happen makes the probability of a financial crisis induced recession all the more believable. After all, our energy costs pale in comparison to our savings, loans and investments. Indeed, my carbon exposure looks a lot more contained than my financial exposure. So, the Economist may argue that the Prime Minister is being penalized for a non-crisis, but when you tell folks a recession is possible, you better be prepared when they believe you.

Written by Dave Sawyer

October 9th, 2008 at 8:05 pm

Posted in carbon tax

Tagged with , ,

Putting the Army Boots to Federal Climate Policy

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A neat little piece of climate policy work was just released, albeit quietly, during the federal election. Nic Rivers and Mark Jaccard have been taking analytical jabs at various climate policies for a very long time. Their central theme has been to compare, from an analytical perspective, what government’s say they will achieve and what their policies will most likely deliver. Their latest contribution, with Jotham Peters, can be found here and provides this nice conclusion:

We conclude that, as currently designed, it is highly unlikely that the policies of the government of Canada will achieve the target of reducing national emissions 20% below 2006 levels by 2020. The lack of an economy-wide emissions price and the allowance for 100% offsets for industrial emitters make it highly likely that emissions will be significantly higher than target levels in 2020 and indeed might even be close to today’s levels. Since the government claims that it is intent on achieving its 2020 emissions reduction target, it is difficult to understand why it does not immediately convert the intensity cap to an absolute cap and eliminate or severely reduce the offset provision. It also needs to extend its cap to cover all emissions in the economy.

The bottom line is that politicians have been promising to save the world for a very very long time but have instead been burning our cash while getting very little done (see Nic and Marks other paper here: Burning Our Money to Warm the Planet).

All climate policy by addressing energy use and production can have wide-ranging and long-term effects in the economy, touching virtually everyone as costs get passed through prices. This is why the election climate policy “debate” , and I use this term loosely, deserves more serious attention. But then again in politics, and especially in this campaign, thoughtfulness is in short supply — “Says who… and your Mom wears Army Boots”. Too bad, cause their political gain is our economic and environmental loss.

Written by Dave Sawyer

October 2nd, 2008 at 2:42 pm

Credit for Early Action and Passing on the Carbon Love…

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If one looks back over the carbon policy discussions in Canada credit for early action figures prominently. Simply, under cap and trade, some argue that they should receive credit for action initiated in the lead-up to implementation. The core argument is that in expectation of a future carbon constraint, early action was undertaken to align with normal capital decisions. Thus, the argument goes, the early action should be recognized in setting the new carbon constraint to be less stringent. Now if you can follow all that, or it you know intuitively what I m talking about, you know why credit for early action is a mess – it is hard to sort out what is real or not. And so with a mechanism to enable credit for early action the regulator has to disentangle investment decisions and motives going back some years and then see how this influences the new allocation. Additionally and administrative burden both likely suffer with credit for early action.

Under the current Canadian plan, there is 5 MT allocated for early action. Not a lot, which is good, but still enough to trigger all kinds of positioning, and to require a few folks at Environment Canada to sort this all out.

And why am I ranting about this? Well there is a neat article here on how one BC municipality will see a carbon bill increase of $300,000 in 2012 under the BC carbon tax. And the link to credit for early action? The carbon tax will implicitly account for all early action undertaken through the lower emission intensity whereas trading may not.

In the case of Burnaby, a range of investments have lowered energy use, emissions intensity, and ultimately the carbon tax burden,

But the best example is Burnaby’s recent earth-friendly upgrades to 49 city-owned buildings. Completed by Honeywell Ltd., the $6-million project includes new light fixtures, water-saving measures and digital controls to keep heating, ventilation and air-conditioning costs down. “That cut down our energy consumption in total by 20 per cent for all of municipal operations”.

No need to sort out motives – the emission intensity does that. This is why a tax can be fairer than trading when one looks at early action. And certainly it is administratively simpler.

And what do rate payers in the municipality get? They get the great cost pass though,

Burnaby residents will be stuck with the bill. “We don’t have any other (funding) source but the property tax,”

But then again, the $300,000 cost in 2010 is less than 1% of Burnaby’s projected $333 million expenditures in 2010. Which makes me wonder why a 1% increase in operating costs four years from now is news.

Written by Dave Sawyer

April 14th, 2008 at 2:23 pm

The Manitoba Carbon Tax two step…

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Design matters. Just take a look at Manitoba. The government’s April 09, 2008 budget introduced a carbon tax on coal of $10/tonne starting in 2011. The casual observer, depending on their particular bias would say either: it is not enough; it is a good start; or why introduce another punitive tax? So, which is right? Well, none actually.

Coal accounts for about 1.3% of all energy consumed in Manitoba, 80% of which is in the electricity sector. For the province, coal totals about 2% of all energy and 7% of all carbon emissions from energy. So, at best a low carbon price will be targeted at about 7% of all emissions.

And oh did I mention the following (see here)

The decision comes as Crown-owned Manitoba Hydro prepares to phase out its last coal-fired electrical plant in Brandon.

So, I suspect we are seeing the emergence of the carbon tax coming full circle on the political acceptability front. Indeed our baby is growing up. It is taking its rightful place amongst other notable ineffective Canadian climate polices such as voluntary inaction, soft cap and rule (a description of the current federal cap and trade plan) and now the great disappearing carbon tax.

Which is why, as we all know, design matters but political will rules. Sure we can debate cap vs tax, allocations or revenue recycling design, but political will sets stringency. Period. So, without a push from the electorate, or that sudden and rare political epiphany as in the case of BC’s Premier Gordon Campbell, inaction will continue to define Canadian climate policy.

Drink anyone?

Written by Dave Sawyer

April 10th, 2008 at 1:33 pm